Public sector banks, including SBI, Bank of Baroda and IDBI Bank, plan to raise Rs 58,000 crore through equity dilution during the current fiscal to meet Basel-III norms and clean up their balance sheets.
Leading the pack, the country's largest lender, SBI, plans to raise Rs 15,000 crore through share sale and expects this to complete by the year-end, probably through a qualified institutional placement (QIP).
"This is something for which we have everything in place but we will go when we find the market is conducive," SBI chairperson Arundhati Bhattacharya has said.
Besides, Bank of Baroda and Central Bank of India plan to raise Rs 6,000 crore and Rs 6,500 crore from capital markets, respectively. Oriental Bank of Commerce and IDBI Bank have taken board's approval for raising Rs 5,000 crore each through equity dilution, while Mumbai-based Union Bank of India plans to Rs 4,950 crore during the current financial year.
Raising funds from the market will ease the pressure on the exchequer of pumping in capital. As per the Indradhanush plan, public sector banks need to raise Rs 1.10 lakh crore from markets, including follow-on public offer, to meet Basel-III requirements, which will kick in from March 2019.
This will be over and above Rs 70,000 crore banks will get as capital support from the government. Of this, the government has already infused Rs 50,000 crore in the past two fiscals and the remaining will be pumped in by the end of 2018-19.
In the Budget speech on February 1, finance minister Arun Jaitley announced capital infusion of Rs 10,000 crore for the current fiscal.
"In line with the Indradhanush road map, I have provided Rs 10,000 crore for recapitalisation of banks in 2017-18. Additional allocation will be provided, as may be required," Jaitley had said.
PSU banks requires capital for meeting Basel-III norms and cleaning of balance sheet as non-performing assets (NPAs) have reached unacceptably high levels. These banks are saddled with non-performing assets or bad loans to the tune of a staggering Rs 6 lakh crore.
Bad loans rose by over Rs 1 lakh crore in the first nine months of last fiscal to Rs 6.07 lakh crore by 31 December 2016. Gross NPA of PSBs stood at Rs 5.02 lakh crore at the end of March 2016, up from Rs 2.67 lakh crore at the end of March 2015.
Corporation Bank and Syndicate Bank have lined up fund raising plan of Rs 3,500 crore each, while Bank of Maharashtra has taken board's approval for raising Rs 2,000 crore. SBI, in 2014, had raised Rs 8,032 crore by selling shares through qualified institutional placement (QIP), largely aided by state-owned life insurer LIC.
The bank sold 5.13 crore shares at an average price of Rs 1,565, which was the lower side of the price band it had set.
Besides, Canara Bank had also raised about Rs 1,250 crore from rights issue to its shareholders last fiscal.